Owing to slow demand, higher commodity prices have impacted the consumer durables sector in CY22. The weak demand for consumer durable products to rising inflation will be a near-term concern.
Heightened competitive intensity and adjusted price hikes resulted in a decline in volumes among consumer durable companies.
According to a BNP Paribas report, the demand will have a recovery over CY23 with moderation in competitive intensity. The sector underperformed by 18 per cent in CY22 with cable and wire companies outperforming the rest.
Further, the surge in commodity prices in anticipation of China reopening can pose a threat to the recovery of consumer durable companies. Commodity prices that peaked due to the Russia-Ukraine crisis witnessed a decline in October 2022 with copper declining by 21 per cent, aluminum by 31 per cent, steel by 35 per cent, and polyprop by 20 per cent.
“We believe that the recent surge is transient and given the global uncertainty about the recession lingering around, commodity prices are unlikely to go back to their CY22 highs, thereby providing some respite to the consumer durable companies,” states the report.
With rising cases of Covid-19 in China, consumer durable companies are also anticipating disruption in the supply of products. Many companies are preponing shipments ahead of the Chinese new year. A shortage of products could impact the industry in the April-June quarter.